Today one of the greats in the business warned King World News that Greece will default within two weeks, sending shockwaves around the world! He also stunned KWN when he said what the ECB is about to do to Greece.
James Turk: "The situation is Greece is deteriorating rapidly, Eric, and the implications extend far beyond the euro. KWN readers need to be ready just in case there are some nasty surprises over the next couple of weeks that roil markets around the globe….
Continue reading the James Turk interview below…
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"Greece has been out of the headlines of the mainstream media, so little attention is being given to the fact that the government there is rapidly running out of money. And crunch time begins on Tuesday, March 31st.
Greece Is Broke
Athens may not have enough cash to meet its month-end obligations. But even if it somehow manages to squeeze through, it needs to repay €450m to the IMF on April 9. And then Athens faces a really big hurdle that may be insurmountable.
Two Greek Treasury bills totaling €2.4 billion mature on April 14 and April 17. Most of this debt is sitting in Greek banks, which have been rolling over these bills with emergency funding obtained from the ECB, rather than demanding repayment from the Greek government. But these two upcoming bills are different because at least €500 million is owed to investors outside Greece who are going to ask for their money back.
Greece To Default Before April 14, Sending Shockwaves Around The World!
If Greece can’t pay, it would be a default, which in turn will trigger acceleration clauses in Greece’s other debt obligations that would require immediate repayment of those debts too. That is when Greece blows up and sends shockwaves around the globe, which will particularly rock the ECB as well as with the remaining depositors in Greek banks. But I think Greece will actually blow up before April 14th.
The ECB has purchased from European banks almost all of the Greek paper these banks previously held. In other words, just like occurred when Lehman collapsed, there will be a bank bailout, but it looks like there will be a difference. Cyprus is a more accurate comparison because the losses will be paid by bank depositors, rather than put on the backs of taxpayers. And maybe this time, even the holders of bonds issued by Greek banks will be forced to take losses, which is where the global impact could be felt.
There have been a lot of fund managers buying Greek debt in search of the high yield it offers, the high yield of course arising because of the high risk. These guys are betting that the ECB will not let Greece collapse, but it now looks like the ECB, the IMF and the EU are forcing Greece into bankruptcy, which is a message that the Greeks themselves are increasingly coming to grips with.
Greek Bank Runs Accelerating Into A Full-Blown Panic
The run on bank deposits in Greece has been fierce. From a peak of total deposits of nearly €240 billion six years ago, deposits have collapsed to the lowest level in ten years to an estimated €130 billion today. Some €30 billion of that amount has been lost just in the past three months.
In other words, Greek banks have lost an astounding 20% of their deposits in the last three months, indicating that the multi-year run on Greek banks is accelerating into near-panic conditions.
Greek Banks Now In A Death Spiral
For years, the Greek government has been kept afloat by the Greek banks. The government was issuing short-term Treasury-bills which the Greek banks were buying. The money the government received from the banks enabled the government to keep its head above water. Athens spent this money as rapidly as it came in.
The Greek banks, in turn, were then using these newly issued Treasury-bills as collateral to borrow money from the ECB. To give you an indication of the size of these borrowings, they rose more than €10 billion in just the last month to over €70 billion today.
The Greek banks have not been borrowing from the ECB by choice, but rather because of desperation. They are in a death spiral, losing deposits and getting stuck with bad loans that can never be repaid as the Greek economy withers away, which is now forcing the ECB’s hand.
ECB To Steal Money From Greek Bank Deposits
The only way the ECB is going to be repaid is by stealing money from bank depositors, just as it did in Cyprus with the "bail-in” the ECB imposed in that country. So to protect its position, the ECB will not let the total amount of deposits in Greek banks shrink to an amount less than what the banks owe to the ECB. And as borrowing from the ECB grows while deposits shrink, we are rapidly approaching the point where this cross-over will occur.
ECB To Pull The Plug On Greece Within Two Weeks!
So based on present trends – with loans from the ECB increasing and deposits flowing out of Greek banks accelerating – I expect the ECB to pull the plug on Greece within the next two weeks. Greece won’t leave the euro, just as Cyprus has not left the euro, but Greece will be hobbled by the ECB repeating what happened in Cyprus.
There is an ebb and flow to the markets, Eric, and this mess in Greece is an indication that the tide is turning, and turning in favor of the precious metals, particularly when their prices are measured in terms of euros."
***ALSO JUST RELEASED: Legend Who Oversees $170 Billion Issues Dire Warning To The United States And Europe CLICK HERE.
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